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Will The Government Shutdown Affect My Closing?

The government shutdown could make it difficult, or even impossible, for

banks to close on your mortgage.

One problem lenders might face involves the Internal Revenue Service.

Before closing on a mortgage backed by Fannie Mae or Freddie Mac, banks must verify a borrower’s income with the IRS. But IRS operations are curtailed because of the shutdown, and the agency won’t be available to handle the paperwork the banks need to close on the loans.

Mortgages insured by the Federal Housing Administration could also face delays. The agency is operating with a skeleton staff — its shutdown plan called for furloughing 96% of its workers — and loan processing will suffer.

However, many of the biggest FHA lenders have the authority to make their own underwriting decisions and won’t need to wait for the IRS to come back online, and FHA mortgages issued through those firms will move forward.

The shutdown’s effect on the Social Security Administration could also cause a snag for borrowers. Lenders often turn to that agency to verify a borrower’s identity and prevent fraud on mortgage applications.

For borrowers who are far along in the mortgage process, the good news is the shutdown likely won’t stop your loan from going through.

But those who apply for new mortgages, including refinancings, during the shutdown should be prepared to wait.

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